Overview of the RPNZ-Rismark Indices
 The
RPNZ-Rismark Indices can be produced for various geographic demarcations
from the suburb or postcode to entire regions, states or nationally.
They can also be produced across all properties or divided between
property types, such as units and houses.
There are three “classes” of RPNZ-Rismark Indices:
The third class of index, known as the “hedonic”
model, has not previously been commercially produced in Australia.
This index utilises comprehensive information on the attributes
and characteristics of residential properties, such as location,
land size, and bedrooms, to measure “quality-adjusted”
changes in property value over time. Two alternative methods for
constructing hedonic models have been designed by RPNZ-Rismark.
The first pooled hedonic index combines data from all time periods
in the one estimation procedure to obtain index estimates. A potential
caveat to this technique is that implicitly the values of housing
attributes are held constant over time. That is, the value that
an additional bathroom adds, for argument’s sake, to the total
value of a house is the same today as when the house was bought.
Few, however, would dispute the empirical result that the value
of a bathroom as a proportion of the value of a house is greater
today than yesteryear. The adjacent-period approach that RPNZ-Rismark
have developed combines data from consecutive time periods to derive
an index which allows for the implicit value of property attributes
to vary over time. This model also avoids the issue of revisability.
That is, as time moves forward and more data becomes available,
historical estimates of the index are likely to change when data
from all time periods is pooled. As a result of the theoretical
and practical advantages of the adjacent period hedonic model over
the pooled hedonic index, it is the preferred hedonic index.
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